US President Donald Trump’s position of penalizing car makers who import cars to sell them in the US market has made every vehicle maker sit up and take notice. Tata Motors
-owned Jaguar Land Rover (JLR), which also relies on exports from the UK to serve the US customer, will be impacted heavily if Trump has his way.
The two UK headquartered brands (Jaguar and Land Rover), which generate nearly the entire yearly net profit of the Mumbai-based Tata Motors, said its business will surely be impacted if any additional taxes are imposed in the US but for the time being it is on a 'wait and watch’ mode.
Speaking to Moneycontrol C Ramakrishnan, Group Chief Financial Officer, Tata Motors said, “It's too uncertain at this stage to be talking about production plans (in the US). I think we need to wait and watch this space as to what happens."
JLR’s net profits plunged 62 percent during the quarter ended December to 167 million pounds from 440 million pounds reported in the same period last year.
“In a global business like Jaguar Land Rover, other than China, in the last couple of years almost all the production happened in the UK. We even have a factory coming up in Slovakia. With 80 percent of sales happening outside the EU JLR sells in 160+ countries all over the world. So, [with] any of these barriers, duties will impact JLR business but it will be premature to predict the impact or the counter measures before we get to know what the changes are likely to be,” added Ramakrishnan.
JLR generates little more than one-fifth of its total retail volumes from the North American market making it one of the single biggest markets for the two brands. It, however, does not have any manufacturing or assembly operations in that region even as it has got operational plants in China and India.
Last month Trump warned German luxury car makers such as Mercedes-Benz, BMW and Audi about an imposition of a steep anti-import tax of 35 percent on vehicles imported into the US. This statement immediately attracted a lot of criticism from car-makers for whom the US is a very significant market.
"If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax," Trump said to the German newspaper Bild in January.
If Trump indeed slaps such a steep tax on the imported luxury cars it would make JLR models prohibitively expensive thereby hurting sales. Retail sales growth from North America was the second best after China in the period of April-January. Sales in the US grew 25 percent to 98,332 units as compared to 78,422 units during the 10 months. China during the same period grew by 32 percent.
Over the last few years JLR announced manufacturing plans in countries where costs are comparatively lower than in the US. These include India, China, Brazil, Slovakia and Austria. Besides, investments were also made at its mother plants in the UK to expand production capacity.